Out of 23 last year, only nine offered shares to retail investors
By Dickson Li 08 February 2010
The market turmoil early last year caused a drought of new listings on the Singapore Exchange (SGX) as firms shied away from a market gripped by fear.
But investors started to see some initial public offerings (IPOs) in the second half of last year, and into this year.
There is just one catch, however: Many of them did not include a public tranche of shares, so ordinary investors missed out on a slice of the action.
For instance, out of 23 IPOs last year, only nine offered shares to retail investors. Even then, the portions were minuscule - mostly between 1 per cent and 3 per cent of the total offering.
The vast majority of IPO shares were privately placed with big institutions.
Of the 14 companies which did not offer a public tranche, all but one - Q&M Dental, a dental health-care group - are listed on the secondary Catalist board.
‘This is quite a common occurrence during uncertain times, when markets are more volatile,’ said Mr. Ding Hock Chai, Kim Eng’s co-head of corporate finance. ‘Underwriters will employ this strategy in order to ensure success (of the IPO).
‘When you do a private placement, you have more time... you can plan for it, gauge the demand, and when the books are overbilled, you can go for it. There’s more certainty for companies,’ he added.
Also, firms prefer placements as institutional investors look more at fundamentals, said underwriter Stirling Coleman Capital’s chief executive, Mr. Ang Kay Tiong. ‘Retail investors are more sentiment driven.’
Last year, SGX halved the number of shareholders required at the launch of a primary listing from 1,000 to 500. For Catalist, the number was cut to 200 from the former Sesdaq’s 500 shareholders.
This eased the burden for placement agents facing an uphill battle to get investors to subscribe to shares in tough times.
‘Since we needed only 200 investors, it was not too difficult for us to do a full private placement,’ said Mr. Alvin Ong, director of Hiap Tong, a Singapore crane company which listed on the Catalist last November in a 38 million share offering.
‘If the requirement had been higher, maybe about 1,000 investors, we would have considered a public tranche.’
However, finding investors in last year’s topsy-turvy environment was no problem for Q&M Dental, the only company that managed to satisfy the 500 investor mainboard requirement even without a public tranche.
‘We managed to secure enough investors, so we decided to save costs by not having a public tranche,’ said Dr Ng Jet Wei, the company’s deputy chief executive.
So why not raise money by avoiding the listing process altogether and simply sell shares privately?
‘Getting listed is a good platform to show that our accounts are all scrutinised, audits are all done, we have passed stringent checks and can be listed on the mainboard,’ said Dr Ng.
Are ordinary investors unhappy about being left out in the cold?
‘Definitely,’ one retail investor, who declined to be named, told The Straits Times. ‘I would have liked to subscribe to Q&M Dental.’
The investor had good reason to feel peeved. Q&M Dental closed at 49.5 cents last Friday, not far from double its IPO price of 27 cents last November.
However, analysts point out that retail investors are not entirely excluded from private placements as they can go to brokerage houses to buy some of the placement shares.
One concern stemming from a reduced number of investors is that shares might suffer from unusual price movements.
But former Westcomb chief executive Peter Choo Chee Kong, who now runs boutique investment firm Messiah, said that SGX is getting increasingly sophisticated in its surveillance, and will be able to cut down on this risk.
Analysts say the outlook for whether more IPOs will be 100 per cent privately placed, or with only tiny public tranches, is in the hands of the SGX.
‘SGX is forward-looking. If the boom times come back, they will adjust the requirement for the number of shareholders accordingly,’ said Mr. Choo.
‘Companies will always want to leave a small retail tranche, so that you can create oversubscription. This will generate interest when people say that your public tranche has been oversubscribed.’
All four IPOs launched so far this year have had public tranches. They are all mainboard listed.
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IPOs not so public after all
Out of 23 last year, only nine offered shares to retail investors
By Dickson Li
08 February 2010
The market turmoil early last year caused a drought of new listings on the Singapore Exchange (SGX) as firms shied away from a market gripped by fear.
But investors started to see some initial public offerings (IPOs) in the second half of last year, and into this year.
There is just one catch, however: Many of them did not include a public tranche of shares, so ordinary investors missed out on a slice of the action.
For instance, out of 23 IPOs last year, only nine offered shares to retail investors. Even then, the portions were minuscule - mostly between 1 per cent and 3 per cent of the total offering.
The vast majority of IPO shares were privately placed with big institutions.
Of the 14 companies which did not offer a public tranche, all but one - Q&M Dental, a dental health-care group - are listed on the secondary Catalist board.
‘This is quite a common occurrence during uncertain times, when markets are more volatile,’ said Mr. Ding Hock Chai, Kim Eng’s co-head of corporate finance. ‘Underwriters will employ this strategy in order to ensure success (of the IPO).
‘When you do a private placement, you have more time... you can plan for it, gauge the demand, and when the books are overbilled, you can go for it. There’s more certainty for companies,’ he added.
Also, firms prefer placements as institutional investors look more at fundamentals, said underwriter Stirling Coleman Capital’s chief executive, Mr. Ang Kay Tiong. ‘Retail investors are more sentiment driven.’
Last year, SGX halved the number of shareholders required at the launch of a primary listing from 1,000 to 500. For Catalist, the number was cut to 200 from the former Sesdaq’s 500 shareholders.
This eased the burden for placement agents facing an uphill battle to get investors to subscribe to shares in tough times.
‘Since we needed only 200 investors, it was not too difficult for us to do a full private placement,’ said Mr. Alvin Ong, director of Hiap Tong, a Singapore crane company which listed on the Catalist last November in a 38 million share offering.
‘If the requirement had been higher, maybe about 1,000 investors, we would have considered a public tranche.’
However, finding investors in last year’s topsy-turvy environment was no problem for Q&M Dental, the only company that managed to satisfy the 500 investor mainboard requirement even without a public tranche.
‘We managed to secure enough investors, so we decided to save costs by not having a public tranche,’ said Dr Ng Jet Wei, the company’s deputy chief executive.
So why not raise money by avoiding the listing process altogether and simply sell shares privately?
‘Getting listed is a good platform to show that our accounts are all scrutinised, audits are all done, we have passed stringent checks and can be listed on the mainboard,’ said Dr Ng.
Are ordinary investors unhappy about being left out in the cold?
‘Definitely,’ one retail investor, who declined to be named, told The Straits Times. ‘I would have liked to subscribe to Q&M Dental.’
The investor had good reason to feel peeved. Q&M Dental closed at 49.5 cents last Friday, not far from double its IPO price of 27 cents last November.
However, analysts point out that retail investors are not entirely excluded from private placements as they can go to brokerage houses to buy some of the placement shares.
One concern stemming from a reduced number of investors is that shares might suffer from unusual price movements.
But former Westcomb chief executive Peter Choo Chee Kong, who now runs boutique investment firm Messiah, said that SGX is getting increasingly sophisticated in its surveillance, and will be able to cut down on this risk.
Analysts say the outlook for whether more IPOs will be 100 per cent privately placed, or with only tiny public tranches, is in the hands of the SGX.
‘SGX is forward-looking. If the boom times come back, they will adjust the requirement for the number of shareholders accordingly,’ said Mr. Choo.
‘Companies will always want to leave a small retail tranche, so that you can create oversubscription. This will generate interest when people say that your public tranche has been oversubscribed.’
All four IPOs launched so far this year have had public tranches. They are all mainboard listed.
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